COSTA MESA, Calif.–With consumers’ finances under strain, financial institutions should fortify security to help improve customer/member relationships, and it appears that an increased focus on account security may be an effective way to accomplish that goal, according to a new J.D. Power report.
“Overall, 35% of bank customers in the United States have experienced some type of fraudulent activity on their credit or debit cards in the past 12 months,” J.D. Power said. “Curiously, though, only some banks are trying to take proactive steps to mitigate those occurrences. Just one-third of customers say they can recall prompts with a security review of their account.”
J.D. Power called it an “area of neglect” that could have negative ramifications on bank customer satisfaction and loyalty.
“Rate-chasing has seemingly stalled out—31% have moved money from their primary bank, largely the same rate since February—and with customers stuck in a financial malaise, security could emerge as a major factor in customers’ decision to move their money,” J.D. Power said in its analysis. “That means banks need to get serious about fraud quickly.”
‘More of the Same’
There has been no significant change in overall financial health. Nearly one-third (32%) of respondents are financially healthy, while 43% are vulnerable, J.D. Power said.
“Overall, 35% of banking customers say they have experienced at least one type of fraud in the past 12 months,” J.D. Power said. “That number increased to 47% for customers under age 40, and 50% of customers that are classified as financially overextended.”
According to J.D. Power, most common occurrences of fraud were someone making an unauthorized purchase with a customer’s credit (9%); an unauthorized purchase with a customer’s debit card (9%); and making a purchase with a P2P payment app that ended up being a scam (9%).
Stepping Up the Security
J.D. Power said it found that while customers have been taking steps to protect themselves against fraud—most notably, checking their statements for suspicious activity (44%) and checking their account activity (33%)—many are looking for support from their banks or card issuers.
“Unfortunately, that support is in rare supply,” the company stated. “Just 36% of bank customers and 35% of credit card customers recall being prompted by their partner to review digital security settings in the past 30 days. Nearly two-thirds (65%) of stressed customers said they did not recall a security review.
“That seems like a lost opportunity for banks to not only improve relationships with their customers but forge a deeper level of trust, particularly among younger customers and those who are currently struggling financially,” J.D. Power reported. “That’s because, when prompts do occur and customers act, the outcomes are largely positive. Nearly two-thirds (64%) felt instructions were completely clear and ended up being completely comfortable with security settings after a review.”
‘Stuck in Neutral’
As overall financial health remains stuck in neutral, J.D. Power said customers are going to start basing their banking decisions on something other than financial literacy or new product offerings.
“Chief among those factors is the security of the accounts,” said J.D. Power. “An instance of fraud can send shockwaves through a customer’s account. It’s time for more banks to not just make it a priority, but relentlessly communicate to the customer what they are doing to help.
“Those that can do it stand to make massive inroads with younger customers. Customers under 40 are victims of fraud more often, and they’re also less likely to stick with their primary bank because of familiarity,” J.D. Power continued. “Winning those customers is key to moving forward, and there’s no better time to earn their trust than when they’re already your customers. Now is the time to move on security.”
The full report is available here.
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